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Media Competition on the Internet

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Author Info

  • Barros Pedro P

    ()
    (Universidade Nova de Lisboa)

  • Kind Hans Jarle

    ()
    (Norwegian School of Economics and Business Administration)

  • Nilssen Tore

    ()
    (University of Oslo)

  • Sørgard Lars

    ()
    (Norwegian Competition Authority)

Abstract

We present a model of competition between two advertising-financed media firms when consumers dislike advertising. We apply the model to analyze competition between Internet portals and find that equilibrium prices of advertising are higher the less differentiated the portals are perceived to be. Moreover, we find that the portals' aggregate profit increases if they integrate vertically with advertisers. This is true even if there is perfect competition between advertisers for advertising space. But if the portals are close substitutes, then it is profitable for one of the portals not to combine with an advertiser, and we end up with an asymmetric equilibrium with only one vertical merger - despite aggregate profits being higher with two.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 4 (2005)
Issue (Month): 1 (January)
Pages: 1-20

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Handle: RePEc:bpj:bejeap:v:topics.4:y:2005:i:1:n:32

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Cited by:
  1. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2005. "Financing of Media Firms: Does Competition Matter?," CIE Discussion Papers 2005-08, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  2. Hans Jarle Kind & Tore Nilssen & Lars S�rgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
  3. ANDERSON, Simon P. & GABSZEWICZ, Jean J., 2005. "The media and advertising : a tale of two-sided markets," CORE Discussion Papers 2005088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Hans Jarle Kind & Lars Sørgard, 2013. "Market Segmentation in Two-Sided Markets: TV Rights for Premier League," CESifo Working Paper Series 4060, CESifo Group Munich.
  5. Junseok Hwang & Dongook Choi & Jongeun Oh & Yeonbae Kim, 2009. "Competition in the Korean Internet Portal Market: Network Effects, Profit, and Market Efficiency," TEMEP Discussion Papers 200925, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
  6. Martin Bandulet, 2005. "On the Efficiency of Spam Mailing and Portal Advertising," Discussion Paper Series 275, Universitaet Augsburg, Institute for Economics.
  7. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Advertising on TV: Under- or Overprovision?," Memorandum 15/2005, Oslo University, Department of Economics.
  8. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
  9. Dong Choi & Jongeun Oh & Yeonbae Kim & Junseok Hwang, 2012. "Competition in the Korean Internet Portal Market: Network Effects, Profit, and Market Efficiency," Review of Industrial Organization, Springer, vol. 40(1), pages 51-73, February.

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